Question

Consider the predicted model to study the effect of gender on wages given as:

Model I: Wage = 7.10 -2.51female, n = 526 r^2 = .116

Now consider, Model II: wage= -1.57 - 1.81female+.572educ+.25exper+.141tenure with n = 526 and r^2 = .364

Compare the estimated gender gap in Model I and Model II. Briefly explain the difference.. out of model I and Model II which model you would choose?

Based on you answer of the model choice, do you think the model you chose has a case for gender discrimination? Explain briefly

Answer 1

Model 1:

hat shows the benchmark category. It shows the average wage of the Male. That is average wage of the male is 7.10.

hat is the differential slope cofficient which shows the difference in average wage of female from that of benchmark category which is male. It shows that average wage of female is 2.51 lesser than that of male.

Model2:

hat shows the benchmark category. It shows the average wage of the Male. That is average wage of the male is -1.57. It has no economic meaning

hat is the differential slope cofficient which shows the difference in average wage of female from that of benchmark category which is male. It shows that average wage of female is 1.81 lesser than that of male.

Since model 2 explain the wage gap between male and female more accurately and this model also shows that there are some other factor as well that affect the wage gap between male and female. Hence I will choose model 2 over model 1.

Yes, the model2 shows that there is discrimination in wage between male and female. The male with same tenure and experience receives higher wage as compare to that of female.